In the case of Lamborn et al. v. The National Bank of Commerce of Norfolk, 1927, the U.S Supreme Court was tasked with deciding on a dispute involving a bank's right to offset deposits against debts owed by depositors who had declared bankruptcy. The appellants were trustees in bankruptcy for two bankrupt corporations that held accounts at the appellee bank and also owed money to it. After their declaration of bankruptcy, but before any adjudication took place, the bank used funds from these accounts to offset its loans without notifying or obtaining consent from either corporation or their trustees in bankruptcy. The court ruled in favor of the bank stating that under Section 68a (now Section 542(b)) of US Bankruptcy Act which allows banks to set off mutual debts between them and insolvent debtors prior to receiving notice about an impending bankruptcy proceeding; this is known as "banker's right" or "right-of-setoff". This decision established precedent regarding how financial institutions can handle outstanding obligations when dealing with bankrupt clients.

The dissenting opinion in the case of Lamborn et al. v. The National Bank of Commerce of Norfolk argued that the majority's decision to uphold a lower court ruling, which held that a bank could not be held liable for accepting deposits from an insolvent depositor, was incorrect and unjustified by precedent or sound legal reasoning. The dissent contended that banks have a responsibility to their depositors and should therefore be required to exercise due diligence when accepting deposits, particularly from those who are known or suspected to be insolvent. By absolving banks of this duty, the majority effectively allowed them to profit at the expense of innocent third parties who were left with no recourse when their funds were lost as a result of insolvency proceedings against the original depositor.